What makes rates move?

Understanding The Currency Markets

EXCHANGE RATES & TIMING

It’s extremely hard to predict exchange rate movements – and it’s important to remember that you are exchanging money to fulfil a purpose, rather than speculating on rates. It’s often better to take an educated decision based on your budget and circumstances, rather than take a risk and potentially end up stuck with a worse rate than you can afford.

Our video guide will give you some information on what can move rates. The currency markets are the biggest financial market in the world, and can be affected by many factors.

Recently, global interest rate movements have been to the fore. Typically, lower interest rates make a weaker (cheaper) currency, so as central banks in the UK, USA and Europe have started to cut interest rates, their currencies’ values have fluctuated accordingly. Investors seek out higher interest rates, which creates demand for particular currencies, therefore increasing their price.

Other economic data releases are important too – you can keep up to date with our news section, updated three times per week. Usually, good news on economic growth or unemployment for example, will make a currency stronger (higher rates), and vice versa.

Political events can also carry weight – a change in government can bring uncertainty, sending a currency lower; and sadly world conflicts can have an effect on currencies when there are economic implications, such as higher energy prices or supply problems.

On a more technical level, analysts do sometimes refer to ‘support’ and ‘resistance’ levels for exchange rates. This is when a pair of currencies has been trading in a particular range for some time, and has seemed unable to drop below a ‘support’ level, or rise above a ‘resistance’ level, because speculative traders tend to sell positions at these rates to take their profits. However, these levels are always broken, eventually!

Ultimately, nobody can predict the future, and while it’s tempting to ‘wish’ an exchange rate up, it’s important to remember that any currency can move just as easily in either direction. At A Place in the Sun Currency, we will work with you to understand your situation and give you some ideas and guidance to help you achieve your goals, while being realistic.

You can lean on our experience and discuss what’s happening with rates at any time, but we don’t provide advice on when to secure your rate.